“When you talk about flavor trends in China, it’s almost like talking about flavor trends in the U.S. – it depends on where you are,” Donald Wilkes, president and CEO of Blue Pacific Flavors & Fragrances, told attendees of the NAFFS 88th Annual Convention. “If anyone has read Tom Friedman’s book, The World is Flat, he talks about a trend called glocalization,” said Wilkes. And from that came a term called “glocal” flavor. Wilkes said he’s seen a lot of this in Asia and believes this has a lot of relevance with the multi-national food companies today and how they’re branding and positioning their products.
“When you look at Shanghai, the growth is amazing,” said Wilkes. There are 20 million people in Shanghai. “What’s really interesting about this particular city is it’s one of the largest markets in China and when you understand the demographics, you immediately recognize that you have a very high income middle-class population.” He said this segment of the population is becoming very wealthy very quickly and has a lot of disposable income. Per capita income, he said, grew at 12 percent in 2004.
There are really two kinds of markets in China, according to Wilkes. “There’s the gray market which is unreported and then there are the statistical numbers that come from the Chinese government. If you look at the government’s numbers, that GDP is equivalent to what California is, for example. But it’s changing so rapidly, it’s almost impossible to watch.
“What is a glocal flavor? My definition would be it’s a branded international food product that expresses a local consumer taste,” said Wilkes. He cited Pepsico’s snack food business as a good example of glocal products.
Looking at the flavor trends in China, particularly in Shanghai, orange is still No. 1 – very strong, very traditional and very indigenous. The Chinese people, Wilkes said, are very loyal and, more specifically, they’re very brand loyal. It’s very difficult for international brands to penetrate the market in China, citing orange juice as an example. He referenced the flavor profile for orange juice in the U.S., saying that it is quite different from the flavor profile in Asia. “China has more of a mandarin/tangerine profile – a little more oily and bitter than ours,” said Wilkes. “And that’s what their understanding of orange is so if you try to take a really fresh, juicy profile to China, it’s not going to work. It doesn’t matter how much money you spend, it’s going to take a long time to re-educate that consumer base.”
“One of the things that’s interesting about China is the whole culture and the Yin and Yang – between eating heated foods when you want to feel the warmth and cooling foods when you want your body to cool,” said Wilkes. He said the real sophisticated food companies today understand this – the mentality and the culture – and they’re applying that basic cultural issue to the development process as well as the category. “A very well designed glocal product,” he said, “is aloe vera flavor. What’s aloe vera flavor? Generally, in flavor terms, it’s kind of an apple lychee-type product. What I like about this product is it’s packaged in what looks like a shampoo bottle, which is very graceful,” said Wilkes.
Wilkes said that although many people think obesity is just a U.S. problem, China has some significant issues to deal with, partly because many Chinese people are changing their diets. “There are a lot of migrations to the major cities. Many of the jobs are being filled by people who are used to making their own food. Their sustenance has been rice, starch, roots, certain vegetables and certain protein. What’s happening now is that’s all changed. They’re going to cities like Shanghai and they’re eating processed foods and they’re gaining weight and becoming ill.”
That scenario is creating opportunities for functional foods. “They understand how food is important to health,” Wilkes said. “Herbal medicines originated in China. It’s only natural that functional beverages are growing.”

Donald Wilkes on Korea

Seoul, Wilkes said, is where everything happens in South Korea. It has the largest population density in Korea with 10.3 million people. It also has the highest middle class population and they’ve got a lot of disposable income relative to the rest of South Korea. “One of the things you’ll find about Korea is that it is tied economically – there’s a lot of economic interdependence with the United States,” said Wilkes. “They actually slowed economically from 5.3 percent in 2004 to 4.9 percent in 2005.
“What I find really exciting about Korea is that they’ve become trend influencers,” said Wilkes. “A lot of people don’t know that. It’s subtle but Korea is having an impact on Japanese culture today largely due to a popular Korean soap opera that has become the hottest commercial property that Korea is exporting today.”
Wilkes said many Korean food sectors are still controlled by a few major companies or “Chabols.” This is very different from Japan where there’s a lot of competition. He said conglomerates such as Lotte control 65 percent of the ice cream market and probably that share in beverages. Indirectly, he added, they may control even more of the beverage market, making it very difficult to penetrate.
Wilkes said Koreans are proud of their local culture and their heritage and that’s reflected in the taste of their products. “What you’ll see a lot of times in Korea is people going toward local tastes. They don’t want American flavors and they don’t want European flavors either.”
Green tea is a growing item in Korea, Wilkes said, noting that Starbucks recently launched it and it’s doing very well. “Korea has had barley tea for years – they call it an eye-health drink. Now barley tea is a RTD and that’s doing very well too.”
Wilkes tabbed the beverage market in Korea at about $3.5 million, saying the carbonated soft drink industry was down by 5 percent last year. People, he said, are moving toward healthier beverages and ready-to-drink juice. “When we look at what the growth category is, it would be in the functional beverage area,” Wilkes said. “In Korea it’s growing double digits.”
Wilkes talked about ice cream trends and delighted the audience by bringing delicious samples of ice cream for all to enjoy. One was a pumpkin flavor with pecans and the other was chocolate with almond rocca pieces in it. Wilkes referenced a super premium product in Korea called Natuur. “I believe today Korea is the only market in the world where Natuur has more market share in its category than Haagen Dazs has,” said Wilkes. “It has 65 percent share in Korea; Haagen Dazs has 35 percent. And when you taste this ice cream, you’ll see why. It’s really a superior product.”
Wilkes said ice cream pouches are a popular product in Korea. The pouch is made in China and is fairly cheap. “They freeze it and it seems to work,” he said. “The concept of a milkshake-flavored ice cream was very interesting to the Koreans.”
As with China, Wilkes said, relationships are important when doing business in Korea. “You’ve got to be a friend first before doing business in Korea,” said Wilkes. That’s a Korean saying: ‘friend first – and then we do business.’ Most American business people would go over to Korea with an expectation of doing a deal. The problem with us is we come from a different culture and our whole view on business expectation is not what their view is,” said Wilkes. “I recommend that you really be patient because deals really don’t get done quickly in Korea. It takes a lot of time. But once you’re friends and you do one deal, you’ll do many deals.”
“When negotiating any deals it’s very important to save face,” Wilkes advised. “Never, ever let your attorney send a direct letter to a Korean. An attorney is kind of like an advisor in business negotiations; they are never brought in. It is the absolute kiss of death when you tell a Japanese or Korean client that you’re going to have your attorney send the letters because that is without question immediately a sense of distrust. Once you get to a certain level in your negotiations, then it is acceptable once they bring their attorney in to bring your attorney in. But don’t bring your attorney in first. Because once you do that, you’re saying to them that ‘I don’t trust you.’ Friendship is of utmost importance.”